I am thrilled to introduce Nick Bautista to you, a fully licensed professional, offering financial and insurance services, which by the way my husband and I count ourselves as clients. -mh
Arguably, one of the biggest and most time-consuming decisions we face in life is the question of when to retire. After all, we want to one day reap the benefits of having done our best to live below our means.
With that in mind, here are five questions for which you need to have solid answers before you let that boss of yours know you’re ready to retire!
1. Have I fully considered the lifestyle I wish to live in retirement?
There you are, ready to retire and all of sudden it hits you—you haven’t thought through how you will actually live in retirement. How you will do that is a big deal. We grow up imagining not having to work forever, but somehow we don’t think through the details of what that lifestyle will look like. Ask yourself:
- What would I like to accomplish?
- What do I look forward to doing?
- What do I want to avoid?
Sure, traveling the world or spending time with grandkids is great, but if your spouse has other ideas you better make sure you are on the same page about what retirement will look like.
Consider: Married couples often forget that the other spouse may not want exactly what they want. It’s important to start talking through your dreams and goals.
2. Do I have a retirement Spending Plan on paper—not just a general idea in my head?
What we think we spend versus what we actually spend is often much different. Most of us think we know where the money goes, but if you don’t track your expenses you have no idea if you can retire. How will you know whether you are spending more than you should out of your retirement savings and investment portfolio?
Consider: The highest spending years are those right before you retire. Naturally, this happens as those are your prime “go-go” years. You will eventually slow down due to health reasons.
Reducing your spending is always harder than being able to ramp up spending. You should have a Spending Plan that accounts for both what you need to spend and what you will be able spend. You could forgo some fun if you need to get groceries for the month, but you can’t necessarily go out and make more money, which makes reliance on your savings vital. Using a budgeting tool like Mint.com to track your spending can help you stay on top of expenses.
3. Do I understand and have a plan for when to begin drawing my Social Security benefit?
According to the Social Security Administration, about 45 percent of people take Social Security at the first opportunity, when they turn 62. Do that and your benefit will be permanently reduced by at least 25 percent.
Consider: Create your account at SSA.gov to get an estimate of your benefits at your full retirement age (FRA). Delaying benefits each year until age 70 can add about 8 percent per year more in benefits. Social Security is only meant to cover a part of your retirement expenses. The average benefit is just under $16,000 annually for someone claiming Social Security. Make sure you know how much you and your spouse can expect.
4. Do I understand and know my options for how and when I will turn my retirement savings into an income stream?
In that you will no longer have a paycheck, how will you create income? How will you cover your living expenses? Before entering into retirement you should know how to rollout and manage your 401(k) or other retirement account money. Retirement is here and it’s time to sell off part of your investments to create income. How do you do that?
Consider: You may want to roll your 401(k) into an IRA and manage the investments yourself or find help. A general rule of thumb is to not take out more than 4 percent from your portfolio each year. This allows your portfolio principal to continue to grow in retirement in order to keep up with inflation.
5. Do I have a specific plan that will allow my income stream to last for my lifetime?
It’s no surprise that Americans are living longer. We smoke less and eat healthier food, which has been increasing our lifespans. A 65-year-old couple has a 74-percent chance that one of them lives until age 85 (according to Social Security Period Life Table 2011). Your money may need to last much longer than 20 years. You are ready to retire when you know your money will support your entire retirement, however long that may be, and you have looked at your budget and created a plan. You know with a high degree of certainty how much you can draw each year to enjoy a fun, lasting retirement.
Consider: Inflation and healthcare costs. Inflation eats away at how much you can purchase. Healthcare costs have been rising every year around 5 percent (according to BLS CPI). Having enough money when you are 80 is just as important as having fun in your 60s. Managing your investments to sustain your lifestyle helps you to do that.
Need help answering these five questions? A good place to start would be reading Mary’s book, The Smart Woman’s Guide to Planning for Retirement (it’s great for men, too!).
Or contact me directly (949-333-6394) to schedule a free consultation. I would love to set up a time that we could chat through these five questions to determine where you are and how you can know for certain when you’re ready to retire.
Do you have specific questions or just need further clarity on retirement? Nick Bautista would love to speak with you. You are invited to contact him by phone 949-333-6394 or email: firstname.lastname@example.org.
The forgoing represents hypothetical examples and are for illustrative purposes only. No specific investments were used in this example. Actual results will vary. Past performance does not guarantee future results. This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
Nick Bautista, CERTIFIED FINANCIAL PLANNER ™
Mark Phillips & Associates ~ 19712 MacArthur Boulevard ~ Suite 225 ~ Irvine, CA 92612
949-333-6394 office // 949-333-6392 fax
Nick Bautista (CA Insurance Lic.#0G06508) is a Registered Representative and Investment Adviser Representative with/and offers securities and Advisory Services through Commonwealth Financial Network, Member FINRA/SIPC,. A Registered Investment Adviser. Fixed insurance products and services offered through Mark Phillips & Associates or CES Insurance Agency.